Archive for January 8th, 2013

[30 second version – NPRF launches three funds to loan and invest €900m in Irish businesses. Two of the three funds are operational now. All are managed by third party asset managers not noted for philanthropy. The NPRF press release is here]

Yes we do indeed have a “sovereign wealth fund” – it’s the National Pension Reserve Fund which was raided by then-finance minister Brian Lenihan in 2009 and 2010 to shore up the banks, and over 24 months we depleted a €25bn fund which was supposed to cushion the future effect of pension commitments in the State. As a wealth fund, the NPRF invests in a range of products, from stocks and shares to more exotic products including property funds. This morning, it has announced €350-500m of its own investment in three funds aimed at providing finance and capital to small and medium-sized enterprises (SMEs) in Ireland. The total size of the funds is estimated at €900m because the NPRF is entering into ventures with other investors, which are bring their own funds to the table.

There are three new funds

1. For healthy companies needing capital. This will have €300-350m, of which the NPRF commitment is €125m, it is managed by Carlyle Cardinal and is operational now.

2. For underperforming companies needing capital. This will have €100m of which the NPRF commitment is €50m, it is managed by Better Capital and is operational now.

3. For companies needing loans and credit. This will have €450m of which the NPRF commitment is €175-325m, is managed by Bluebay and should be operational by “early in the second quarter of 2013”

So you can probably hear ISME and the SFA shouting “yippee!” and this is good news as lack of financing has consistently been blamed by SMEs for endangering existing businesses and halting expansion – some studies conclude lack of financing is the primary inhibitor of survival/growth.

There is no further information forthcoming at this point about the timing of the investment, will it be €10m, €100m or €900m this year or is it phased. The managers are not known for their philanthropy and will be rewarded as asset managers, and it is not clear how the funds will be marketed so that suitable SMEs can make contact with the NPRF.

So, good news, but imagine if we still had €25bn to invest in Irish business instead of €500m…

“I do not mean this disrespectfully but a large segment of the public sees the public interest directors as being about as useful as paps on a bull.” Part of Senator Paul Coghlan’s brief contribution to the Oireachtas finance committee hearing with Permanent TSB public interest directors, Ray MacSharry and Margaret Hayes on 19th December 2012

Okay, he didn’t say “tits” but down our way, we’ve never heard of “paps”.

On 19th and 20th December 2012, the Oireachtas Finance, Public Expenditure and Reform committee met with six – the two from each of AIB, Bank of Ireland and Permanent TSB – public interest directors, though in Michael Somers’s case, he is a “government nominee”. The 2-day hearings established there was no difference between public interest directors and non-executive directors only – this revelation came as a surprise to some TDs and senators. And despite being appointed by the Minister for Finance to whom they are nominally responsible, there hasn’t been a single meeting between director and the Minister.

The PIDs have cost us well over €2m in total to date. They don’t have any termination date for their terms of office. And over the two days, TDs and senators struggled to see what contribution the PIDs had made to their respective organizations, not just what you might perceive as a “public interest” contribution but any contribution.

So, why keep them?

Back in 2009, then-finance minister Brian Lenihan had reportedly lost all trust in the management of the banks, so he hand-picked a number of former politicians and public servants, from which were appointed the PIDs. The PIDs didn’t stop the burgeoning losses at the banks and didn’t even manage to get the banks to reveal their true capital requirements – that fell to the Central Bank of Ireland with a group of global consultancies under the watch of the bailout Troika. There was no evidence of support or lobbying in favour of the new Personal Insolvency Act, signed into law by the President on 27th December 2012, and just now awaiting a commencement order from justice minister, Alan Shatter. Payment of bonuses and the pension top-up at AIB seem to have passed largely unnoticed by the PIDs.

It is not in dispute that the PIDs haven’t contributed to the running of their respective organizations or that there is evidence that they were any less effective than fellow non-executive directors. But 3-4 years after their appointment, it may be time to consider if there are better qualified non-executive directors out there who are not protected in their roles indefinitely by the Minister for Finance.

The hearings on 19th and 20th December 2012, were particularly bad-tempered with impatient argument about differences between public interest and “normal” non-executive directors as well as remuneration. Mind you, there was some sharpness between new chairman, Ciaran Lynch and members of the committee as well. It was Senator Paul Coghlan who popped in from other business in the Oireachtas who “respectfully” passed on the public assessment of PIDs.